Welcome Unsolicited Advice

INSIDE MAN

Support private sector partners for a change

by Tito F. Hermoso

September 21, 2011 17:48

More than a quarter century ago, our country was led by a hopeful and globally admired administration that had one serious fault. It was annoyed by and allergic to unsolicited advice. One cannot help but look back to those days and say; what would not have happened if it wasn't so onion skinned? All those destructive coups, infrastructure decay, power failures, foreign investor exodus along with unions and local governments empowered unto abuse could have been avoided.

Given that at that time we were already a pariah in debt circles, the ugly duckling of the ASEAN Tiger economies, we managed to dig ourselves a deeper hole by a prevailing mood of jingoist nationalism, driving away foreign investors. Our democracy degenerated to ochlocracy (mob rule). Justice was by viva voce and mass media lynching, courtesy of yellow journalism, unchecked in its new found power and freedom from censorship.

With the change in dispensation, bureaucrats of the political appointee kind decamped with their former masters. Government at that time had infrastructure plans for the future and despite the malaise of the new amateur ochlocracy and the loss of credit standing, there was hope that the infrastructure backlog can now be planned without politicking. Besides, the cadre of career service executives already had established professional dialogue with international multilateral aid and development assistance agencies in the planning of infrastructure. There were blueprints that any NEDA 5-year development plan would be proud off and projects that met the stringent Economic impact criterion of the ICC - Investment Coordination Committee. Amidst the ruins of a degenerating economy, there was hope.

Eight years after, the BOT [Build-Operate-Transfer] Law came on stream and we were flooded with grand projects, solicited and unsolicited, with equally grand financing. Besides a whole new power grid and dozens of power plants to tackle the power fiasco, there were dozens of toll road projects, with Hopewell's Sual, Pangasinan to Pagbilao, Quezon scenic Sierra Madre expressway as the most spectacular. The momentum carried on to railways, airports and Ro-ro ports. This youthful Asian exuberance was felled by the Asian Financial Crisis. Since then, infrastructure has picked up the pace, largely because of the determination and perseverance of the private sector.

Government could not match the access to credit, innovation, creativity and vision of the private sector, no doubt a result of decades of underfunding as such "planning" does not excite the popular vote of the ochlocracy. Hence, by default, most of the grand infrastructure plans were from the private sector. Being not as risk averse as government, the private sector plans were nevertheless commercially astute. Of course, the profit motive makes any institution more agile and imaginative. The BCDA, technically a government agency custodian-investor-rain maker of converted bases real estate is run along private sector lines. Its notable successes are Clark, Subic, John Hay and Bonifacio. But the most successful out-of-box project that it ever dealt with was unsolicited: the SCTEx.

At inception, the Cassandra's outnumbered the visionaries. Highways experts scoffed at the limited traffic it would generate and the loss it would incur. Its route, through Pinatubo's virgin landscape, was nowhere linked to any DPWH network. The more suspicious looked at the project as a milking cow for the influential. But the SCTEx found a willing investor in the most conservative of Japanese institutions: the JBIC. It gave BCDA 40 years, terms that no local or Asian bank could match. The SCTEx was to be built and finished to Japanese dual carriageway standards. Local contractors applying for sub contract work were insulted when they did not pass Japanese standards. Several "demolition jobs" against the project sprouted in the tabloid press. But now, the SCTEx is a reality and a necessity. Having been successful, JBIC is willing to finance the BCDA to continue the dual carriageway SCTEx to La Union [TPLEx] and a spur to Dingalan Bay on the Pacific Coast. [NOTE: Today's TPLEx stage 1 reaching Gerona, Tarlac as a 2-lane single carriageway highway is privately funded by PIDCo.]

The success of the SCTEx, encouraged and revived other private sector businesses to offer unsolicited proposals not just for toll highways, but also for high tech adjustable Ro-ro ports, dredging of silted lakes, hydro electric dams, ports, railways, power plants, smart grids, nationwide broadband, integrated metro-transit inter-modal systems, trams and commuter light railways.

Alas, all of this is in limbo. It would appear that in the course of investigating corruption, today's government looks at unsolicited proposals as a corrupt practice. Corruption can and will happen if and when checks and balances are not triggered. In the BOT law and the PPP guidelines, there are strict conditions for a project to proceed and the final check-balance was the subjection of the project to a "Swiss Challenge". Thus any unsolicited proposal will always have to pass scrutiny as international anti-corruption standards must be met to secure donor or foreign financing. Classifying unsolicited proposals as corrupt, is misunderstanding effect for cause.

The flag-hugging private sector, the same private sector that benefits if the country catches up with its infrastructure backlog, is hopefully still zealously motivated to make plans where the government has none. In some PPP projects, the government has insisted that right-of-way purchases be shouldered by the project proponent. As in BOT, government is supposed to own the road right of way so why is it passing that burden to the private sector? Where's the partnership there? Or is the government idea of partnership like that of a jail warden whose attitude is guilty until proven innocent? Or does the cash register mentality reigns, making demands so onerous that the proposer will have no choice but to walk away? Does the witch hunt have to creep into even matters as boring as planning for our future? Planning has not been a strong suit from our knee jerk society. All the more reason for the government, who failed to plan, to let the private sector do it for them, and instead support them rather than treat them with suspicion.